Most people’s scenario of a domestic help glitch might include a room left dirty, a badly cooked meal or laundry left unfolded. But for the millions of American families who employ someone to help around the house or garden, the reality could be far worse.
Simply put, unless they are in the estimated 10 percent of families who follow a complex set of taxation and workers’ compensation rules governing domestic workers, they could be jeopardizing their entire financial future if their domestic worker is injured while on the job.
Officially, there are fewer than 1 million domestic workers in the U.S., not counting employees of such firms as Merry Maids that contract out domestic help. Experts estimate the actual number as 2 million or more. Yet according to tax figures, only about 240,000 families are paying employment taxes or workers’ compensation for their domestic workers.
Employers of domestic help might think they are unlikely to get caught, since so few follow the rules. But the consequences could be costly.
Let’s say your nanny slipped down the house stairs and had to be hospitalized. Hospitals and other medical providers routinely ask whether an injury occurred at work. If your nanny said her injury occurred at work, the case is immediately categorized as a workers’ compensation case, putting the employer on the line for hundreds of thousands of dollars in medical bills.
Workers’ compensation laws are legislated by individual states and the rules about who needs to be covered vary widely. Currently, 24 states require workers’ compensation insurance for domestic help, but requirements vary by type of worker and hours worked.
In New York, for example, employers must have a workers’ comp policy for everyone employed for more than 40 hours per week (including domestic workers), but part-time domestic workers are covered by homeowners insurance. By contrast, in California employees who have worked more than 52 hours and earned $100 or more during the 90 days prior to the injury qualify for workers’ compensation benefits. This means that many employees you might consider part-time, such as babysitters, could require workers’ compensation coverage.
The website of the Insurance Information Institute has a table offering state-by-state guidelines. The insurance departments of individual states also offer useful information.
Some homeowners policies will include workers’ compensation coverage for domestic workers, usually for an additional premium. Even if you have paid for this additional coverage, you’ll want to check your policy wording—some policies cover only “occasional workers’ compensation” exposures, which might not cover full-time or live-in help.
Domestic workers can create other risk exposures. Most accidents happen in the family car while the employee is running an errand. If your employee causes an accident while on the job, you could be liable. The situation can be exacerbated if the employee does not have a legal driving license because they are undocumented.
The standard homeowners policy does not cover employment-related claims, such as wrongful termination or sexual harassment, brought by your domestic help. You can minimize your exposure by conducting a thorough background investigation before hiring, having job descriptions and personnel files for all household help, and communicating your expectations clearly.
Employment practices liability insurance (EPLI), originally developed for the workplace, can now cover homeowners from employment practices lawsuits brought by employees. If you have a nanny, maid, driver, yard worker, caretaker, private nurse or other household employee, you need EPLI.
Many insurers now offer policies specifically for homeowners. Coverage varies by insurer, but many provide $250,000 or more to cover legal settlements, plus full coverage of legal costs. Some policies designed specifically for high net worth individuals even cover the cost of public relations counsel to repair reputations damaged by allegations of harassment or discrimination.
Domestic workers can create a variety of risk exposures for your family. To discuss your situation and how to protect your workers and your finances, please contact us.
Wage and Record-Keeping Requirements for Live-In Help
Employers must pay live-in domestic service workers at least the federal minimum wage, currently $7.25 per hour, for all hours worked. (Higher state minimum wages might apply.) When a live-in worker engages in typical private pursuits such as eating, sleeping, entertaining and other periods of complete freedom from all duties, he or she does not have to be paid for that time. For a live-in domestic service employee, such as a live-in home health aide or a nanny, the employer and worker may agree to exclude the amount of time spent during a bona fide meal period, sleep period and off-duty time. If the meal periods, sleep time or other periods of free time are interrupted by a call to duty, the interruption must be counted as hours worked.
Employers must keep a copy of their agreement with their live-in worker. Effective January 1, 2015, the Department of Labor also requires employers to keep records showing, among other things, the exact number of work hours actually performed. Workers must be compensated for all hours worked, regardless of the agreement. If the number of hours actually worked consistently differs, the employer and worker must enter into a new written agreement.